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Stuart J
Stuart J, Solicitor
Category: Law
Satisfied Customers: 22401
Experience:  PGD Law. 20 years legal profession, 6 as partner in High Street Practice
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I have a ltd company and initially had 1200 shares in the company.

Customer Question

I have a ltd company and initially had 1200 shares in the company. Once I got an investor I signed an sh01 form to increase the share capital by another 1000 shares.
The ex investor who is trying to screw me over has transferred £1000 into the company bank account saying it is for his shares but no longer wants to be a part of the company!
I forward dated and completed my annual return on companies house by assigning all of the new issue shares to myself as I am the md of the company.
Does the ex investor have a claim over the shares? What should I do? Please help
Submitted: 3 years ago.
Category: Law
Expert:  Stuart J replied 3 years ago.
Do you have a specific question?
Customer: replied 3 years ago.

Yes, what is my position? Does he have a claim over the shares? If yes, what should I do to get rid of him?

Expert:  Stuart J replied 3 years ago.

So there are 2400 shares. He paid £1000 for 1000 but doesnt have them?

Is any of this in writing? How is he trying to screw you?

We need full background please. Thanks

Customer: replied 3 years ago.

I am the MD of the company. When I incorporated the company there was 1200 shares in the company. I then signed an sh01 to increase the share capital by 1000 shares to 2200.


Last Friday he said that he had lost faith in me and the business and said he "was out...game over."


He put 1000£ into the business account on the Wednesday before he said he did not want to continue with the business.


When I heard on friday that he no longer wanted to continue, I forward dated my annual return to reflect that I owned all of the shares in the business.


No, none of this is in writing regarding the shares, he just transferred the money. I have not issued a share certificate or anything like that to him. Nor is he a registered director on companies house.


I believe he is trying to screw me because he does not want to continue with a business but is trying to get a 45% shareholding in the company and hence would make him amenable to 45% of the companys future earnings.


He emailed me this morning in a very hostile expressing that he is now a shareholder in the business due to transferring the 1000£. Is this the case?

Customer: replied 3 years ago.
Relist: Other.
solicitor went offline. need answer quickly
Expert:  Stuart J replied 3 years ago.











I am afraid this is
not an instant service because we all have clients and court and travelling and
other users and weekends. Sometimes you will get a reply in minutes. Sometimes
it may be hours.

Why dont you simply give him his £1000 back? Why dont you want him to have shares?



Customer: replied 3 years ago.

no problem at all. never used service before so apologies.


please get back to me at your convenience.


Ben

Expert:  Stuart J replied 3 years ago.

No worries. The site makes people think they get an answer in nanoseconds!

The site is hpsted in US and I am in Cheshire

Why dont you simply give him his £1000 back?

Why dont you want him to have shares?

Customer: replied 3 years ago.

If I gave him the £1000 back, could he reject it?


 


I don't want him to have the shares as he does not want to continue with the business and I don't want him to be able to sit back and earn money from future business earnings when he is not willing to do anything to contribute.


 


Would there be any benefit to me as the sole director in closing the ltd company and re incorporating a new company under a different company number as the business is not trading yet? or would that be too harsh a step to take?


 


What would you recommend?

Expert:  Stuart J replied 3 years ago.


There are a lot of different scenarios and
options.

Firstly, £1000 is not worth arguing over in
court because he will not get his legal costs back even he wins.



If you have his bank details, you can always
simply send his £1000 back.



You can send him a cheque and see if he says
he wants the shares instead.



However, there was clearly an agreement for
him to buy shares in the company and he paid you the money in that respect. So,
whilst he may not yet have the shares, I think you are contract actually bound
to let him have them.



If you do not, you are in breach of contract.



If you are in breach of contract he is
entitled to damages/compensation. To get damages/compensation. He has two of
suffered loss.



At this stage, the business is not trading
and therefore makes no profit and the chances are that the shares would be
worth less than £1000.



At this stage, I think the maximum he could
argue that he is lost as a result of your breach of contract is £1000.



However, you need to be aware of what rights
he has as a shareholder.



He is entitled to dividends and share of
profits. Of all the company income goes to pay director's salary (yours) then
there will never be any profit and there will never be any dividend and whilst
he may own a substantial percentage of the company, it will never be worth
anything unless in years to come, it floats on the stock exchange or suchlike.



The other thing, the last thing an investor
wants to do, is being business with someone who does not want them.



If he were asking me the same question, I
would telling to take the thousand pounds and walk away.



You can issue more shares. But you have to
offer them to him in the same proportion that you and him own now and it would
mean him buying more in order to keep his percentage.



The company has not traded and therefore
there is no conflict (that would be financially worth arguing over) if you set
of another company doing the same thing.



To be honest, I would be inclined to send a
cheque for his thousand pounds, Mark the letter without prejudice save as to
costs, and tell him that you have simply changed your mind, and there is his
money back. If he feels differently, he should take you to court.



If he does, you will have to defend his
proceedings. Remember that even if he wins, he will only get back what he has
lost which at this stage is not a lot and he will not get his legal costs paid.



Can I help further? Please bear with me
today because I will be online and off-



line.



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The thread remains open.

It is not an instant service so sometimes you will get a response in minutes
and sometimes it will be hours.



Thanks

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